It's been hard for me to hold off on LOTR for this long but there's no way I was going to support the TE-only release.
The best way is to do the double disc. The films are already edited to support 2 discs with the fade to black, no sense changing that. They are good break points and lets you either split the movie between 2 nights or stretch your legs to change the disc.
Looking at ROTK I don't think there would be room to keep the average video bitrate at even 20Mbps (audio wise there's a lossless track, other languages, commentary, etc. in addition to other fluff on the disc). With lots of action, sweeping shots, and super detailed scenes I just don't think it would cut it.